Condominium Law – Safe Harbor Application – Who Owns The Note And Mtg? -October 24, 2016

October 24 th, 2016 .

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Cuevas, Garcia & Torres, P.A.

Vantage Property Title Company


Andrew Cuevas, Esq. – President
e-mail: [email protected].

Tel: (305) 461-9500
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Mr. Andrew Cuevas, Esq., is the President of Cuevas, Garcia & Torres, P.A., and Vantage Property Title Company. Cuevas, Garcia & Torres, P.A., provides legal services in the areas of Community Association Law, Real Estate law, and Business Immigration, including title insurance services through Vantage Property Title Company. If you have any questions regarding this article or any other questions, you may contact Mr. Cuevas at (305) 461-9500 or via e-mail at [email protected]. If you are interested in reading previous newsletters, please visit, select the icon for Newsletters , and then choose the area of law you are interested in.

Protecting Your Homestead Proceeds Upon Sale Of Property

The issue of whether ownership of a note and mortgage is essential to the “safe harbor” limited liability for unpaid condominium assessments provided by Section 718.116(1)(b), Fla. Stat. (2013), was addressed in Brittany’s Place Cd’m. Ass’n., Inc. v. US Bank, NA, Case No.: 2D-15-3444 (Fla. 2d DCA, October 5, 2016). The court answers that a holder with rights to enforce is entitled to the safe harbor.

US Bank, the holder and servicer of a note and mortgage, obtained a foreclosure judgment against the unit owner and the Condominium Association, and title to the unit after the foreclosure sale. The Association and Bank disputed the Association’s estoppel letter contents, resulting in the Association filing a lien foreclosure complaint to which the Bank counterclaimed seeking compliance with the safe harbor and a declaratory judgment. The trial court granted the Bank’s motion for summary judgment.

The court analyzed the statutory safe harbor provisions in §718.116(1)(b)(2013), finding three requirements:

(1) the first mortgagee must have named the association as a defendant in the foreclosure action;

(2) title must have been acquired through foreclosure or deed in lieu of foreclosure; and

(3) the entity which acquired title must have been the first mortgagee or its successor or assignee.

The third and last requirement was at issue.

The Condominium Act does not define the term “first mortgagee.” Section 721.82(7) Fla. Stat. (2014) defines a mortgagee as an entity “holding a mortgage lien.” Buttressing this conclusion, the court applied the clarification provided in §718.116(1)(g), which provides that the “successor or assign” is “only a subsequent holder.” However, then “there must have been a prior holder.” Further, the U.C.C.’s holder provisions do not apply to a mortgage because a mortgage is not a negotiable instrument pursuant to Florida law.

Finally, adopting a dictionary definition, “holder” is otherwise defined as a person who “holds” as an owner or “a person in possession of and legally entitled to receive payment of a bill.”

This decision reinforces the need for associations to carefully analyze the basis for rejecting a safe harbor. Though not addressed by the court, there is the risk of attorney’s fees for the parties as the lender is now a unit owner and the parties presumably will seek prevailing fees.

Surprisingly, given the court’s analysis, there was no suggestion that the safe harbor text be amended to better utilized terms of art, such as “owner or holder.” Consistency in terminology has become more focused during the last decade’s litigation of lien and mortgage foreclosures. Thus, this the safe harbor statutes should be on the list of potential areas of clarification

This article is solely a partial explanation of all the issues related to the topic of this newsletter, and is not to be considered legal advice. Associations should consult with its legal counsel to obtain explanations of all issues addressed herein and determine what procedures will most beneficial. This Memorandum is for informational purposes only and should not be relied upon as a legal opinion..